ENRON'S ARROGANCE

January 17, 2002 -- JEFF Skilling, Enron's CEO until last August, who less than two years ago said Enron's stock, then at $80, should sell for $126, also said traditional companies like ExxonMobil "will topple over from their own weight." Today the unbearable lightness of being Enron (stock price when trading was suspended Tuesday: 67 cents) proves that the famously innovative company pioneered a new way to topple.

It is axiomatic: Minimizing the consequences of folly maximizes the amount of folly.

Wow. That deserves to be on a wall plaque in every classroom in the country.

As for the flip side mentioned earlier in the article (policies that unintentionally encourage managers to do things that are counter to the interests of the company itself), I witnessed a sterling case of that myself way back when.

Soon after I graduated from college, I worked for a company (coincidentally, another energy-related company in Houston, although hardly as big as Enron, and on the software side of the industry) which had recently brought in a batch of new middle managers to take the company to the next level.

These managers were given an incentive in the form of a hefty percentage of any increases they made in the company's annual revenue.

Being both shrewd and unscrupulous, the new managers realized that they could make enormous bonuses if they basically sold off everything of value that the company had -- wow, look at those huge revenues (for the first year).

They did things like take the software product that used to be leased to clients on an annal basis, and which was the main long-term income earner for this company (its "cash cow"), and offer to sell it outright to clients for a one-time fee equal to about four years of leasing. Most clients accepted the offer.

They laid off most of the R&D department, and anyone on the programming staff who was working on "next year's products". And so on.

In short, they utterly gutted the company and left it an empty shell, one unable to live on for another year. But boy, did they produce huge revenues for the one year they were in charge. So they took their giant percentages of the increased annual revenue and then moved on to greener pastures. It was over before the owners of the company could catch on to exactly what had been happening. But by then it was too late.

The hollow husk of the company, which by that time was little more than its prior good name, was sold to and absorbed by another company, which added the dead company's name to its letterhead.

This is both the best and the shortest explanation of the Enron debacle I have read. No surprise that it was written by George Will.

The basic truth of government and society is that people respond to incentives. When there are financial rewards for any behavior -- whether it is dealin drugs, or giving to charities -- the amount of that behavior will increase. The officers of Enron were rewarded financially for cooking the books. The Anderson accountants were rewarded for not looking into the phany partnerships that concealed losses.

The Clinton Administration was rewarded for helping Enron get billions of dollars in contracts.

The only place the rewards process broke down was in the Bush Administration. The Secretaries of Commerce and Treasury decided not to help Enron try to pull its chestnuts out of the fire. The "so anything if there's money to be made" syndrome only stops when it reaches the desk of someone who has a sense of right and wrong.

Only in the Bush Administration did Enron come up against adults, people with a sense of right and wrong, people who know how -- and when, and why -- to say "no."

Congressman Billybob

Click and listen to Phil and Billybob in the morning. As this is posted, Billybob's segment is over, but Phil is still on the air.

But of course, the real problem with the Enron collapse is... What are they going to re-name the Astros' stadium now? /sarcasm

For people outside of Houston (or outside the pro baseball community), allow me to explain:

When taxes were used to build a shiny new baseball stadium (don't get me started on *that* topic), it was dubbed "Enron Field" thanks to the miracle of corporate sponsorship (translation: Public money built the field, but for a yearly fee of $3.3 million Enron could stick their name on it and pretend it was theirs).

Now that Enron has tanked, are they going to rename the stadium? Good question. When asked that very question, a spokesman for the Astros gave one of the best PR-speak replies I'd ever heard:

"If you were to ask me the question today, it will be called Enron Field on April 2 [opening day of baseball]. But there is so much that could happen. Every day could bring a new twist to this deal. ... We are waiting to see how this plays out."

To the casual observer, it sounded like, "we don't have any answers to that question yet". But if you paid attention to what she was actually saying, her message was loud and clear: "as long as the sponsorship money keeps coming in, sure, but if they miss a payment, expect a sudden name change".

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